Madras High Court has set aside the Company Law Board’s order which had held that in a case involving sale of shares of the Indian company by the foreign company, on action by one of the secured creditors of the latter, the question as to whether the Receiver outside India made best efforts to get maximum relief to the creditors of the foreign company, and the question whether there was proper advertisement before sale of the shares, were not issues that would come within the jurisdiction of the Company Law Board in India to adjudicate. The Board in its impugned order had though held that it had jurisdiction to entertain a dispute regarding such sale in the United Kingdom, of the shares of the Indian company held by the foreign company, it ruled that it had no jurisdiction to test the fairness of the procedure adopted by the Joint Receivers in England.
Relying upon definition of ‘share’ in Sections 2(46) of the Companies Act, 1956 and after noting provisions as in Sections 36(1), 108(1) and 111, the Court in its order dated 16-4-2015 was of the view that the extent to which the foreign company was entitled to transact upon the said property (shares of the Indian company) is always subject to the Indian Laws and that any transfer can take place only in accordance with the procedure prescribed in the Companies Act, 1956. It was observed that challenge in this case was not the procedure as adopted by foreign Insolvency Court, but it was an attack on the Director of the Indian company who had taken the shares for a token consideration.